Private Wealth Management

The Official Blog of Acuity Knowledge Partners

Impact of Research on Private Wealth Management

Published on June 25, 2018 by Priya Vaidyanathan

Private wealth management is a highly personalized, relationship-driven business model, where the quality and depth of services offered to clients form a key differentiator. Private wealth managers (PWMs) service ultra high-net-worth individuals (UHNWIs) through a trusted relationship and offer a broad range of services – from investment management and financial planning to advice on tax and legal matters. Investment advice, backed by adequate research, provides a competitive edge for a PWM and also helps the relationship manager to have a credible conversation with a client.

Global net investable wealth in the HNWI+ segment (net investable assets >USD1mn) already exceeds USD55tn and is expected to grow to USD69.6tn by 2021, according to the EY Wealth Management Outlook 2018 report. The US and China are expected to contribute over 45% of overall growth. The report also attributes growth in wealth to growing returns on asset classes due to market access, expertise, scale-based negotiation power and involvement in shaping framework conditions.

Growing wealth offers a substantial opportunity for PWMs to grow their market share of assets under management (AuM) by offering customized solutions to clients in terms of asset allocation, portfolio creation, risk management and continuous performance monitoring. The PWM model is high touch and personalized. PWMs typically use an effective combination of top-down and bottom-up approaches to generate valuable investment advice.

Research is an important prerequisite for a PWM providing independent advisory services.

Having an in-house, experienced research team enables the PWM to provide alpha-generating investment ideas. A proprietary research product significantly enhances brand image and also helps to attract and retain clients. Providing access to global coverage helps clients to diversify their investments geographically. The coverage universe undergoes regular maintenance, providing timely updates on new developments or news that may impact the stock price/issuer recommendations. The single stock and issuer research is supported by regular macroeconomic, thematic and sector research.

The research team analyzes markets and develops strategies by region to help clients meet their financial goals. After the global financial crisis, many regulations, such as MiFID II in Europe and the FATCA in the US, were introduced to ensure investor protection and to increase transparency of fees charged. Regulations such as MiFID II have also introduced the need for an independent in-house view on advice given to clients.

While an in-house research team is an expensive option, the PWM could also explore alternate options such as partnering with a service provider to complement the in-house research team in a cost-efficient way, using a third-party research product or using its own institutional research. However, an in-house research product is accretive to the top line through the premium advisory fees that are charged as a percentage of AuM.

Our latest whitepaper analyses the strategic research solutions available to Private Wealth Managers.



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About the Author

Priya has over 17 years of experience in equity research and financial auditing. At Acuity Knowledge Partners, she currently manages client relationship and delivery for leading private banks. She has been with the company for over 14 years and has led teams in sell-side and buy-side engagements. She previously worked at Ocwen Financial Services and as an auditor at Deloitte. Priya is a Chartered Accountant and holds a Bachelor of Commerce degree from Bangalore University.

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